A carbon credit is a tradable instrument (typically a virtual certificate) that conveys a claim to avoided GHG emissions or to the enhanced removal of greenhouse gas (GHG) from the atmosphere. One carbon credit represents the avoided or enhanced removal of one metric ton of carbon dioxide or its carbon dioxide-equivalent (CO2e).
Carbon offsetting is the practice of using carbon credits to offset or counter an entity's greenhouse gas (GHG) inventory emissions in line with reporting programs or institutional emissions targets/goals. Carbon credit trading mechanisms (i.e., crediting programs), enable project developers to implement projects that mitigate GHGs and receive carbon credits which can be sold to interested buyers who may use the credits to claim they have offset their inventory GHG emissions. Similar to "offsetting", carbon credits that are permitted as compliance instruments within regulatory compliance markets (e.g., The European Union Emission Trading Scheme or the California Cap-n-Trade program) can be used by regulated entities to report lower emissions and achieve compliance status (with limitations around their use that vary by compliance program). Aside from "offsetting", carbon credits can also be used to make contributions toward global net zero GHG-level targets. It is an individual buyer's choice how to use, or "retire", the carbon credit.